Assurance Commodities – A Review of Financial Accounting and Insurance Issues
Assurance is a word used in many business transactions. But how do you compare the quality assurance of two different assurance providers? In this article, we will compare the quality assurance of two common assurance providers – Standard & Poor’s Insurance Company (S & P) and United Insurance Exchange (UIE). We will discuss quality assurance, what it means, why it matters in the insurance industry and how to use it to your advantage. Let’s begin!
What is assurance? It is a word that describes a high degree of confidence in the financial statements that summarizes the financial performance of a company. “Unquestionable reliability” is the highest rating possible. “Viewed as a fair market value” is another way to describe it. In essence, assurance is a standard of judgment used by the company so as to provide reasonable assurance regarding its ability to manage its risk. Standard & Poor’s and UIE are two popular assurance companies.
How should a company value its assurance? As previously stated, assurance is a standard of judgment or standard of reasonable assurance that accounting standards allow. It therefore requires companies to evaluate their assurance against certain characteristics that are described in three important documents – audited financial statements, management’s statement and fair statement of income and assurance letter. The audited financial statements and management’s statement will help you and other decision makers to understand the assurance offered by the company.
When you are evaluating the assurance offered by a company, you should be aware of three important factors that affect your decision. First, a company’s financial statements and management’s statement will show the type of assurance and the level of risk associated with it. Second, audited financial statements will reveal the type of assurance and the degree of risk associated with it. Third, a company’s fair statement of income and assurance letter will provide information about the assurance and the company’s internal control measures used to determine the assurance level.
The first thing you need to do is to evaluate the type of assurance offered by the company. Many assurance providers are typically general accountants, review agents or auditors. If the company has a specific profile, it could be appropriate for you to discuss with the consulting services regarding the assurance it provides. For instance, if the assurance provided involves a large amount of credit card risk, the consulting services should discuss with the underwriter how the assurance covers those transactions. Or, the underwriter may request additional information from the accounting firm regarding the types of transactions the company obtains and the manner in which the transactions are executed.
The next factor to consider is the nature of the assurance services. In general, all assurance services are non-traditional because they involve significant accounting risks, as well as significant financial statements risk. As an example, many insurance companies purchase insurance on the basis of future claims. At the time of taking the assurance, these companies are not prepared to assess the likelihood of future claims. This makes it difficult for the assurance services to assess the price per unit they will charge. On the other hand, if the insurance company were able to analyze future claims based on past performance data, then the process would be straightforward.
You can also use the GAAP guidance to assess the assurance firm’s solvency and liquidity. The terms solvency refers to the company’s ability to fund its obligations. Liquidity refers to the ability of the company to execute its financial statements. The two concepts are closely related, because the ability to execute its financial statements becomes very important when the company is on the verge of a bankruptcy. If the financial statements of a company are not accurate, it could lead to a significant reduction in its stock price and a corresponding decrease in its marketability.
A manager or the senior management of an assurance company is responsible for assuring the investors and complying with the provisions set forth in the indemnity agreements. However, the assurance manager is only responsible for those areas of the assurance business that are not their responsibility under the indemnity agreement. Thus, the chief risk in this area is that the investor may become disinterested or unable to obtain a sufficient amount of assurance as a result of adverse market conditions. Also, if the principal underwriter fails to perform underwriting duties required by the securities laws, the principal is fully responsible for those areas that are not their responsibility.